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Did CNBC contribute to the Great Moderation or the Great Recession?

Author

Listed:
  • Mark Setterfield

    (Department of Economics, Trinity College)

  • Shyam Gouri Suresh

    (Department of Economics, Davidson College)

Abstract

We construct a multi-agent system (MAS) model of cyclical growth in which aggregate fluctuations result from variations in activity at firm level. The latter, in turn, result from changes in the state of long run expectations (SOLE) or “animal spirits” and their effect on firms’ investment behaviour. We focus on the impact of a common source of information – analogous to the mass media – on the amplitude of aggregate fluctuations. Our results suggest that the amplitude of growth cycles is reduced by extremes of attention or inattention to aggregate economic performance, but that this relationship is subject to complicated (and possibly complex) phase transitions.

Suggested Citation

  • Mark Setterfield & Shyam Gouri Suresh, 2013. "Did CNBC contribute to the Great Moderation or the Great Recession?," Working Papers 1307, Trinity College, Department of Economics.
    • Handle: RePEc:tri:wpaper:1307
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    File URL: http://www3.trincoll.edu/repec/WorkingPapers2013/WP13-07.pdf
    File Function: First version, 2013
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    More about this item

    Keywords

    Aggregate fluctuations; animal spirits; cyclical growth; multi-agent system; sentiment;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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